Democratic Sentinel, Volume 4, Number 14, Rensselaer, Jasper County, 14 May 1880 — Redemption of the Six per Cents. [ARTICLE]

Redemption of the Six per Cents.

The following letter has just been sent by the Secretary of the Treasury to Hon. Thomas F. Bayard, Chairman of the Finance Committee of the United States Senate : Sir : I have the honor to acknowledge the receipt of your letter of the 20th uIL, transmitting the Senate bill to define the amount and manner of purchase of public loans to be made by the Secretary of the Treasury, and requesting my views in regard thereto. The bill in question requires the Secretary of the Treasury to purchase outstanding obligations of the United States bearing interest at 6 per cent, per annum, to an amount not less than $5,000,000 each week until he shall have purchased and extinguished all such outstanding obligations, these purchases to be made in addition to and independent of any purchases of outstanding obligations of the tlnited States made by the Secretary on account of the sinking fund. The bill also provides that all purchases of bonds hereafter made shall be advertised in the public press on Monday of each week, and the purchase of the amounts thus advertised for shall be made by the treasury on Wednesday of each week. In reply I have to state that the amount of 6-pcr-cent. obligations now outstanding is about $250,000,000, which, under the provisions of tliis act, the treasury would be obliged to purchase within the next fifty weeks. To accomplish this purpose, surplus revenues within that period must amount to the face of the bonds and the premium paid thereon, the present rate of which is about 6 per cent., or the reserve in the treasury accumulated for redemption purposes must be used or resort be had to increased taxation. The surplus revenues since the Ist of January, though larger than was expected, or can be expected in future, have been only about $10,000,000 a month, but should they continue at the same rate they will provide for payment within the next fifty weeks of less than onehalf the bonds which this bill requires to be purchased. With the Deficiency bill now pending in Congress, and which will soon become law,

and the probable appropriations for the next year, there is no probability of having such a large amount of surplus revenues as stated. There is at present of cash in the treasury about $152,000,000 above all matured liabilities, excepting United States notes. Of this amount there i* of fractional silver coins and minor coins about $23,000,000, which would not be available for the purchase of bonds, these coins being legal tenders only in small amounts. This would leave of available cash in the about $129,000,000, which amount was accumulated to a large extent by the sale of bonds for resumption of specie payments, and is a little less than 40 per cent, of the amount of outstanding notes. Neither the la w nor sound public policy seems to permit any encroachment on this fund. There would seem, therefore, to be no method of carrying out the provisions of the bill except by resort to increased taxation, and the propriety "of such increase for this purpose must be neiermined by Congress. I deem the matter es advertising in advance the amount of bonds to be purchased as inadvisable. Such course would only enable bankers and brokers to advance the price of bonds and to dictate terms to the treasury. Under the existing method of making purchases it is understood by all that the surplus of the Government will be paid out from week to week in the purchase of bonds, bids for which will be received up to noon of each Wednesday at the sub-treasury in New York. The amount of bonds to be purchased is not made public until after all bids are in, thus preventing any combination to compel the treasury to pay exorbitant rales for bonds, and it is well unde) stood that the department reserves the right to reject all bids should prices be considered unduly high--a right which would be Surrendered under the proposed bill. I know of no reason for making any purchases of bonds beyond the amount of surplus revenues, and for this purpose the treasury already has sufficient authority, while the present method of making purchases is probably as advantageous to the Government as any that can be devised. I am, very respectfully, John Sherman, Secretary.